Equity-release: How to Release Equity in Your Home
When you have equity in your home, it is tempting to spend all of the money on a new car or renovating your current property. However, there are much better ways to use this money – like buying another investment property. Investing in a second property can be an excellent way to build wealth and diversify your investments while still living comfortably in your primary residence.
Releasing equity to buy another property is a good strategy to pursue if you are in a low interest rate environment and want to take advantage of the current market conditions. Once your equity is released, it can go towards an investment property – with no additional cash needed from other sources. A good strategy for releasing equity to buy another property is when you have lower mortgage interest rates than your rental properties. If there’s not much difference between the two, you may want to consider a different strategy.
When you buy a property with equity, make sure to take into account the costs of running two properties. You may not be able to rely on your current income as it comes in for both purchases unless the loans are paid off early or payments are low enough that they do not exceed your monthly net income.
By investing in a second property, it will not only diversify investments but also allow you an opportunity to collect rental income or eventual capital growth. And don’t worry about breaking even right away: if both properties are financed properly there should be enough monthly net income left over after payment of expenses (mortgage payments) such as taxes and insurance to cover all other expenses and obligations.